Question 11pts

Choose the statement below that is TRUE.

Group of answer choices

A. A rational decision maker will never take sunk costs into account.

B. (From the perspective of the consumer) When the fixed fee increases, the quantity consumed will always decrease.

C. If own-price elasticity of demand = 0, then a change in price will have no effect on total revenue.

Statements (A) and (B) are both True.

Statements (B) and (C) are both True.

Flag question: Question 2

Question 21pts

Which of the following statements is true about firms in a perfectly competitive market?

Group of answer choices

Firms spend significantly on advertising to draw customers away from competitors.

Firms follow competitors' behaviors closely.

Firms are price takers.

Firms face a horizontal demand curve.

Choices (C) and (D) are both correct.

Flag question: Question 3

Question 31pts

Juan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.)

• Total revenue is $120,000,
• Total fixed costs are $100,000
• Total variable costs are $110,000
• Marginal cost is $200/unit
• Quantity produced is 600 units

What will you suggest to Juan?

Group of answer choices

Shut-down immediately

Do not shut down and increase production

Do not shut down but decrease production

Do not shut down and do not change the current production level.

Flag question: Question 4

Question 41pts

The market for raspberries is perfectly competitive and is in a long-run equilibrium. Each firm's long-run average cost is minimized at $4.00 per pint of raspberries and a quantity of 1000 pints. The market demand for a pint of raspberries is: Q = 16,000 - 1,000P where P is the price in dollars and Q is a pint of raspberries. Assume all firms in the market have the same costs and that these costs are the same in the short-run and long-run. What is the total amount currently spent by all consumers in the market?

Group of answer choices

$0

$4,000

$12,000

$48,000

More information is needed to solve the problem.

Flag question: Question 5

Question 51pts

Select the FALSE statement about two-part tariffs:

Group of answer choices

When all consumers are identical, there is no deadweight loss.

When there are two types of consumers that cannot be distinguished, the firm should set a per-unit price below marginal cost.

When there are two types of consumers that cannot be distinguished, there is deadweight loss.

When consumers are identical, the firm sets a per-unit P = MC, and charges a lump-sum fee equal to consumer surplus.

Flag question: Question 6

Question 61pts

Consumers with a high willingness to pay

Group of answer choices

have higher surplus under first-degree price discrimination.

have higher surplus under a single-price monopoly.

are indifferent between first-degree discrimination and a single-price monopoly.

are likely to have higher surplus under a two-part tariff than a single-price monopoly.

Flag question: Question 7

Question 71pts

FlyExclusive is a company that offers memberships for access to chartered private jets. They are trying to decide the optimal price for their membership fee and are considering using a two-part tariff. They estimate consumer demand to be: Q = 200 - 0.1P (or P = 2000 - 10Q), where Q is the number of charted jet flights per year and P is the price per flight. If the marginal cost of serving each customer is $100 per flight, what is the optimal two-part tariff that FlyExclusive should charge?

Group of answer choices

Membership Fee = $180,500; P = $100 for each flight.

Membership fee = $200,000; P = $0 for each flight.

P = $1050 for all flights, no membership fee.

Membership fee = $200,000; P = $100 for each flight.

Membership Fee = $200,000, P = $1,050 for each flight.

Flag question: Question 8

Question 81pts

A rain coat manufacturer sells raincoats in Arizona and Oregon. Due to different climates, each state has different demands for raincoats. The marginal cost of production is the same in each state and is a constant $30. The demand curve for raincoats in each state is: Q_Oregon= 130 - 2P (or P = 65 - 0.5Q_Oregon) Q_Arizona= 80 - P (or P = 80 - Q_Arizona)

The raincoat manufacturer wants to practice third-degree price discrimination. How much should it charge in each state? (Assume that resale between the states is not possible.)

Group of answer choices

P = $30 in both states.

P = $65 in Oregon and P = $40 in Arizona.

P = $80 in Orgon and P = $55 in Arizona.

P = $47.50 in Oregon and P = $55 in Arizona.

P = $47.50 in both states.

None of the above choices are correct.

Flag question: Question 9

Question 91pts

During the height of the pandemic, many airlines substantially cut back on the number of flights offered each day. Now, as demand has increased as people begin travelling again, Delta and United are considering adding flights to their current daily schedules. The following payoff matrix describes the payoffs associated with adding flights or maintaining their current number of flights, where payoffs are listed in millions of dollars.

Suppose that, in an effort to further incentivize United, the U.S. government decides to offer United an $8 million subsidy if they decide to increase their # of flights. This subsidy will be paid to United regardless of Delta's actions. Based on this subsidy, what is the Nash equilibrium in this subsidized game?

Group of answer choices

Delta increases its number of flights, and United maintains its number of flights.

Delta maintains their number of flights, and United increases its number of flights.

There are two Nash equilibria: (1) United increases its number of flights and Delta maintains its number of flights; (2) Delta increases its number of flights and United maintains its number of flights.

There is no Nash Equilibrium in this game.

None of the answer choices are consistent with the game's outcome.

Flag question: Question 10

Question 101pts

Mustafa buys a $20 lottery ticket with a 5% chance of winning $2,000 and a 95% chance of winning zero. Based on this, what can we infer about Mustafa's risk preference?

Group of answer choices

Mustafa is risk loving.

Mustafa is Risk Neutral.

Mustafa is Risk Averse.

We cannot infer Mustafa's risk preference from the information given.

Flag question: Question 11

Question 111pts

Consider the market for used RVs (recreational vehicles). If buyers and sellers each know the true quality of the RVs, then which of the following is true?

Group of answer choices

The asymmetric information problem is eliminated and all RVs will sell for the same price.

There is still an asymmetric information problem, but all RVs will sell for the same price.

The asymmetric information problem is eliminated and all RVs will sell for their true value.

There is still an asymmetric information problem, but all RVs will sell for their true value.

Flag question: Question 12

Question 121pts

A major sports league, comprised of 200 players, reported a loss of $620 million in 2021. The sports league has yearly fixed costs of $700 million. The league is considering shutting down for the 2022 season and selling the rights to all of their players to a rival league for the entire 2022 season. What is the lowest price the sports league would be willing to accept (indifferent) for the rights to their players, which would then lead to a shut-down for the 2022 season?

Group of answer choices

$80 million

$620 million

$700 million

$1300 million

None of the above.

Flag question: Question 13

Question 131pts

The following statements regard a repeated game between two-players. Which of the statements are true?

Group of answer choices

A repeated game will always yield the same outcome.

A repeated game can result in behavior that is different from what it would be if the game were played only once.

Repeated games are impossible.

Repeated games turn a cooperative game into a non-cooperative game.

A repeated game is possible only if the payoffs in the matrix change.

Flag question: Question 14

Question 141pts

You are discussing auction theory with your friend who makes two claims:

I. A bidder should always bid their true value in all sealed bid auctions.

II. The winner's curse is most likely to occur in a common value auction.

Which of these statements are true?

Group of answer choices

I and II are true.

I is true and II is false.

I is false, II is true

I and II are false.

Flag question: Question 15

Question 151pts

Betty White's house in Carmel, CA is being auctioned off in a second-price sealed bid auction. There are 5 mega-fans taking part in the auction. They each have a private value listed below.

All bidders, except Bidder #2, have taken Business Microeconomics and understand auction theory. As such, these bidders will submit bids using their optimal strategies, while Bidder #2 submits a bid of $13 million. Which bidder will win the auction and what will be the amount paid?

Group of answer choices

#2, $11 million

#2, $12 million

#3, $12 million

#3, $11 million

#5, $10 million

#5, $11 million

Flag question: Question 16

Question 161pts

Singer/songwriter Paul Simon recently received two offers for the rights to his music. BMI offered him a large contract where he would get $250 million, but only if there were 1,000,000 downloads of his songs. On the other hand, Sony offered him a guaranteed $50 million. Given this information, which of the following statements is true?

Group of answer choices

If Paul Simon thinks there will be more than 1,000,000 downloads 10% of the time and signs with BMI, then he must be risk averse

If Paul Simon thinks there will be more than 1,000,000 downloads 10% of the time and signs with Sony, then he must be risk averse

If Paul Simon thinks there will be more than 1,000,000 downloads 25% of the time and BMI, then he must be risk neutral.

If Paul Simon thinks there will be more than 1,000,000 downloads 20% of the time and prefers to sign with Sony, then he must be risk averse

Flag question: Question 17

Question 171pts

Which of the following methods reduces moral hazard in car insurance markets?

I. Requiring high deductibles

II. Having high monthly premiums (i.e. the amount a customer pays for the insurance each month).

III. Offering bonuses for not filing insurance claims.

Group of answer choices

A. I, II, and III

B. II only

C. I and III only

D. III only

Flag question: Question 18

Question 181pts

Suppose that the marginal cost of a one-way airfare is $110. If the airline practices perfect (first-degree) price discrimination, how many customers will purchase one-way airfare?

Group of answer choices

1 customer

2 customers

3 customers

4 customers

5 customers

6 customers

Flag question: Question 19

Question 191pts

Recent reports have shown that the streaming giant, Netflix, is losing subscribers and viewers of its programs. However, its rival, Hulu, just reported its highest viewership ever with the premiere of The Kardashians. Both streamers are deciding on their advertising budgets for the second half of 2022. Each firm can either choose to "maintain" their current level of advertising or can "increase" their current level of advertising. The payoffs associated with these decisions are shown in the matrix below.

Which of the following statements is true?

Group of answer choices

A. The Nash Equilibrium is for Netflix to maintain advertising and Hulu to maintain advertising.

B. The Nash Equilibrium is for Netflix to increase advertising and Hulu to increase advertising.

C. There are two Nash Equilibrium (Maintain, Increase) and (Increase, Maintain)

D. Neither firm has a dominant strategy,

Both A and D are true.

Both B and D are true,

Flag question: Question 20

Question 201pts

GovernmentJobs.com is a that allows public sector employers to post jobs and workers to apply for those jobs. The website makes it easy for workers to apply for many jobs -- whether that worker is a good fit for the job or not. In fact the website boasts, "One Application, Thousands of Jobs." As a result, public sector employers who use this website to solicit applications, are looking for a quick way to sort through and identify which job candidates are serious applicants.

Of the following methods, which is likely to be the most effective at identifying serious candidates who are interested in the job?

Group of answer choices

Tell job candidates to put a big smily face in the upper left corner of their application to indicate their serious intent.

Allow job candidates to notify up to three jobs of their serious intent.

Tell employers to search for the word "interest" in each job candidates cover letter.

Have job candidates send messages to those jobs they are particularly interested in.

Flag question: Question 21

Question 211pts

Any firm that is profit-maximizing always does the following:

Group of answer choices

A. Sets P = MC

B. Sets Supply = Demand

C. Sets MR = MC

D. Choices (A) and (C) are both correct.

E. Choices (A), (B), and (C) are all correct.